[PODCAST] US Open Rundown 31st August 2021
- European bourses are firmer though are off post-EZ CPI highs, Euro Stoxx 50 +0.4%; US futures have pared overnight gains, ES +0.1%
- Chinese Manufacturing PMI missed estimates, while Non-Manufacturing and Composite PMI both showed a contraction for the first time in 16 months
- The DXY remains downbeat with peers bid across the board but NZD the main beneficiary taking impetus from AUD/NZD action
- Core debt is depressed with pressure exacerbated by EZ inflation eclipsing expectations
- Looking ahead, highlights include Canadian GDP, US Chicago PMI, Consumer Confidence, ECB's Lane
The EU voted to approve fresh restrictions on US travellers coming into the bloc. US State Department raised the travel alert for Germany and Canada to level 3, while the US also issued COVID-19 "Do Not Travel" advisories for Switzerland and Estonia. (Newswires)
Australia's capital of Canberra will extend its lockdown through September 17th. There were separate comments from Australia's Victoria State Premier Andrews that it is too soon to open up from the COVID-19 lockdown and they would need a low number of cases to ease restrictions, while he added that the reopening plan is to be announced tomorrow but it is not freedom day with only modest changes. (Newswires)
Tokyo COVID-19 cases 2909 vs prev. 1915; Japanese PM Suga is to order the compiling of an economic package and additional budget within the week, according to a ruling party official. (Newswires)
COVID C.1.2 variant does not appear to be increasing in circulation, according to a WHO spokesperson. (Newswires)
Asian equity markets traded cautiously as participants digested disappointing Chinese PMI data and with a non-committal tone seen at month-end following the mixed handover from US, where the S&P 500 and Nasdaq extended on record highs led by growth and tech although cyclicals and financials lagged amid a lower yield environment. ASX 200 (+0.4%) was kept afloat by outperformance in tech and health care but with upside limited by soft domestic data releases, as well as ongoing virus restrictions that have been extended in the capital and with Australia's Victoria State Premier also noting it is too soon to open up from the lockdown. Nikkei 225 (+1.1%) was subdued for most of the session after somewhat varied data releases including a surprise decline in the Unemployment Rate and with Industrial Production back in negative territory albeit at a narrower than expected decline, before staging a late rally to reclaim the 28k level. Hang Seng (+1.3%) and Shanghai Comp. (+0.4%) were initially lower after the miss on key Chinese data in which the headline Manufacturing PMI missed estimates at 50.1 vs exp. 50.2, while Non-Manufacturing and Composite PMI both showed a contraction for the first time in 16 months. The losses in Hong Kong were exacerbated by regulatory concerns with Ping An Insurance the worst hit amid reports China’s banking and insurance regulator is probing the Co.’s property market investments and Tencent is also pressured after China unveiled new restrictions on young people playing online games whereby gaming names are to only allow minors a total of three hours of play for the week. However, as the session progressed and European participants began to enter the fray losses were pared back and bourses ultimately concluded the session positively. Finally, 10yr JGBs were choppy with initial support amid the continued strength in T-notes as Fed Chair Powell’s dovish virtual Jackson Hole appearance continued to reverberate across US treasuries and amid roll activity, although JGBs later gave up their earlier gains as the risk appetite in Japan eventually improved and despite firmer results at this month's 2yr JGB auction.
PBoC injected CNY 50bln via 7-day reverse repos with the rate at 2.20% for a CNY 40bln net daily injection. (Newswires) PBoC set USD/CNY mid-point at 6.4679 vs. exp. 6.4666 (prev. 6.4677)
China's securities regulator is planning to impose more control regarding private equity funds and will not permit public offerings masked as private equity, while China is also reportedly to curb unordered capital expansion in entertainment. (Newswires)
China's market regulator is said to be proposing amendment e-commerce law; China will step up punishments on IP violations. Separately, Some major Chinese banks stepped up lending towards the end of August and reduced backlog in property loans after receiving regulatory guidance to increase August loan quotas, sources state. Additionally, to intensify its crackdown regarding violations in the property sector. (Newswires)
- Chinese NBS Manufacturing PMI (Aug) 50.1 vs. Exp. 50.2 (Prev. 50.4)
- Chinese Non-Manufacturing PMI (Aug) 47.5 vs. Exp. 52.0 (Prev. 53.3)
- Chinese Composite PMI (Aug) 48.8 (Prev. 52.4)
US House Democrats AOC, Tlaib and Pressley called for US President Biden to replace Fed Chair Powell. (Politico)
ECB's Holzmann said he expects inflation to decline for 2021 and 2022, while he also expects a marginal impact from the fourth COVID-19 wave. (Newswires)
- UK Lloyds Business Barometer (Aug) 36 (Prev. 30)
EU HICP Flash YY (Aug) 3.0% vs. Exp. 2.7% (Prev. 2.2%); X-Food & Energy Flash YY (Aug) 1.6% vs. Exp. 1.4% (Prev. 0.9%)
- X-Food, Energy, Alcohol & Tobacco Flash YY (Aug) 1.6% vs. Exp. 1.5% (Prev. 0.7%)
German Unemployment Change SA (Aug) -53k vs. Exp. -40.0k (Prev. -91.0k, Rev. -90k)
- Unemployment Rate SA (Aug) 5.5% vs. Exp. 5.6% (Prev. 5.7%, Rev. 5.6%)
- Total SA (Aug) 2.538M (Prev. 2.6M, Rev. 2.591M)
US Central Command Commander General McKenzie said the US military has completed its withdrawal of forces from Afghanistan which marks an end to the nearly 20-year mission in Afghanistan and that the last American left Kabul about 12 hours ago, while he believes there could be in the ‘very low hundreds’ of US civilian citizens still in Afghanistan. (Newswires)
US President Biden is to address Americans regarding Afghanistan on Tuesday and has asked Secretary of State Blinken to lead the coordination with international partners to ensure safe passage to those that want to leave Afghanistan, while he added that the world will hold the Taliban to its commitment regarding safe passage. There were also comments from Secretary of State Blinken that the US will continue relentless efforts to help Americans, Afghans and others to leave Afghanistan if they choose to and that under 200 Americans are believed to have remained in Afghanistan. (Newswires)
Saudi coalition has intercepted a second booby-trapped drone targeting the Abha airport, prelim. indications are of eight casualties and some damage to a civilian craft, AJ Breaking. (Twitter)
Russia, Iran, Azerbaijan and Kazakhstan are set to hold naval drills in the Caspian Sea. (Ifx)
Russian Foreign Minster says the new round of discussions with the US regarding nuclear strategic stability are to occur on September, Ifx. (Newswires)
Stocks in Europe vary but ultimately hold an upside bias, with the Euro-bourses modestly firmer across the board but the UK’s FTSE 100 posting mild losses on its return from the long weekend (Euro Stoxx 50 +0.3%; Stoxx 600 Unch). European equity futures similarly vary, whilst their counterparts across the board are mildly firmer across the board with the NQ (+0.2%) and RTY (+0.3%) narrowly ahead of the YM (+0.1%) and ES (+0.1%). News flow has once again been light in early European hours, with markets treading water ahead of the US open and in the run-up to this week’s ISM metrics and the crucial US jobs report. Back to Europe, Euro-bourses saw a leg higher in conjunction with the bond decline seen after the above-forecast EZ CPI metrics, with the DAX Sep’21 future and cash eclipsing the 16k mark shortly after. The FTSE 100 (-0.2%) initially narrowly outperformed, but Monday’s declines in crude and yields caught up to heavyweight oil and banking names, with BP (-1.2%) and HSBC (-2.5%) among the laggards, with the latter also weighed on by its exposure to China amidst the ongoing crackdown – with the latest suggesting further measures against violations in the property sector. Sectors in Europe are mixed and do no portray any particular theme. Tech outperforms amid tailwinds from Wall Street whilst basic resources glean support from the price action across some base metals and alloys. Banks resided as the underperformer throughout most of the session, although the EZ CPI metric lifted yields off lows and the banking sector with it. In terms of individual movers, Ambu (+7%) resides at the top of the Stoxx 600, with some attributing the strength to reports that the CEO acquired shares in the firm. Rolls-Royce (-2.5%) failed to gain much traction from the noise surrounding a unit sale as shareholder Causeway Capital Management (9% stake) has called for a board shakeup. Finally, Infineon (+1.8%) and Weir Group (+3.0%) are both near the top of their respective bourses following broker upgrades.
South Korea has passed the world's first bill which dents Apple (AAPL) and Google's (GOOG) dominance over how apps on their platforms sell digital items, WSJ; companies that do not comply could be fined as much as 3% of their South Korean revenue by the Communications Commission. (WSJ)
China Evergrande (3333 HK) reports HY revenue CNY 222.6bln vs prev. CNY 266.63bln. Co. will adjust its debt profile when necessary and based on market conditions; risks of defaults on borrowings. (Newswires)
NetEase Inc (NTES) Q2 2021 (USD): EPS 0.98 (exp. 0.75), Revenue 3.18bln (exp. 3.18bln)
DXY - The Buck is buckling again, and arguably succumbing to more than mere month end pressure after attempting to stabilise on Monday when the index recovered from a 92.595 low to trade near 92.800 at one stage. However, momentum faded just ahead of the 21 DMA and the index subsequently lost 92.500+ status to probe recent lows, including an effective double bottom either side of a weekend in mid-August (92.468 and 92.480 to be precise on August 13 and 16 respectively) before finding underlying bids at 92.456 vs 92.716 at best in advance of US house price data, Chicago PMI, consumer confidence and a couple of regional Fed surveys.
NZD/AUD - Yesterday’s major laggards are taking full advantage of the Greenback’s demise, while the Kiwi also caught the Aussie dwelling on weaker than expected building approvals data plus disappointing Chinese PMIs overnight to the extent that Aud/Nzd hit a 1.0350 trough irrespective of declines in NBNZ’s business outlook and own activity readings. Meanwhile, Nzd/Usd has breached 0.7050 and has the 100 DMA (0.7084) to aim for ahead of NZ terms of trade for Q2 on Wednesday, as Aud/Usd hovers below 0.7350 awaiting August’s manufacturing PMI, Q2 GDP and breakdown, with hefty 1.4 bn option expiry interest at the 0.7400 strike and the 50 DMA (0.7385) also capping the upside.
CHF/EUR - Some payback for the Franc and Euro as well following weak starts to the week, with Usd/Chf retreating through 0.9150 and Eur/Usd securing a firm grasp of the 1.1800 handle with some stronger than forecast Eurozone data including preliminary HICP, German jobs and French Q2 GDP.
CAD/GBP/JPY - The Loonie is consolidating after outperforming and scaling 1.2600 pre-monthly and quarterly Canadian growth data today, but further appreciation could be stymied by the proximity of 1.2 bn option expiries at 1.2560. Elsewhere, the Pound failed to get any incentive via BoE consumer credit, mortgage approvals or lending that came in sub-consensus across the board, as Cable touched 1.3800 before waning, and Sterling may also have been conscious of the fact that technical resistance lies just beyond the psychological level in the guise of 200 and 50 DMAs (1.3806 and 1.3813). Similarly, the Yen will be wary about an upside chart marker at 109.66 (100 DMA) as it meanders between 109.98-78 following not as bad as feared Japanese ip and an unforeseen dip in the jobless rate, though also underpinned by 50 DMA support if it slips beneath 110.00 as that stands closeby at 110.11 today.
EM - Broad gains at the expense of the Usd, but the Zar also boosted by a surpri
- Australian Building Approvals (Jul) -8.6% vs. Exp. -5.0% (Prev. -6.7%, Rev. -5.5%)
- Australian Current Account Balance (AUD)(Q2) 20.5B vs. Exp. 21.0B (Prev. 18.3B)
- Australian Net Exports Contribution to GDP (Q2) -1.0% vs. Exp. -1.0% (Prev. -0.6%)
- New Zealand NBNZ Business Outlook (Aug) -14.2% (Prev. -3.8%)
- New Zealand NBNZ Own Activity (Aug) 19.2% (Prev. 26.3%
Notable FX Expiries, NY Cut:
- USD/CAD: 1.2560 (1.2BN), 1.2575 (660M), 1.2700 (695M)
- AUD/USD: 0.7300 (889M), 0.7330 (450M), 0.7400 (1.4BN)
Bunds and their Eurozone peers are underperforming in wake of stronger than anticipated HICP prints, a few other data releases that also surprised to the upside and Italian supply that was somewhat mixed in terms of covers vs prior offerings of the same tenors. However, the former has not seen much follow-through selling having slipped through 176.00 to 175.96 after finally breaching Fib support at 176.12, while Gilts are still holding the bulk of their corrective gains within a 128.81-129.05 range and US Treasuries are idling sideways into the last few macro events on the calendar for August amidst a supportive month end index backdrop
UK DMO intends to hold 20 Gilt auctions in the October - December period and two syndications in this period, including a news 20-30year Gilt. (Newswires)
Greece is planning a reopening of its 0% Feb 2026 and 1.875% 2052 GGBs; syndicated transaction to be launched in the near future. (Newswires)
WTI and Brent futures are once again softer but still within yesterday’s ranges in the run-up to today’s JTC meeting and ahead of tomorrow’s JMMC/OPEC confabs (Click here for a full preview). The OPEC+ decision-making meeting will be taking place against potential supply threats from a rampant Delta variant and the US’ desire for lower oil prices. The group have several options on the table for September production: 1) stick with the planned +400k BPD monthly hike, 2) defer the hike and maintain current production for at least September, or 3) increase output by a smaller volume. OPEC+ ministers have been relatively quiet since the mid-July meeting, but sources have suggested that the planned 400k BPD hike will likely go ahead. The Kuwaiti oil minister, however, has indicated that producers could mull halting the planned hike, citing COVID as the main factor, although he added that nothing had yet been discussed among participants. In terms of scheduling, the Joint Technical Committee (JTC) will meet on Tuesday at 12:00BST/07:00EDT to assess oil market conditions and examine its developments and trends. The Joint Ministerial Monitoring Committee (JMMC) will then review this data on Wednesday at 15:00BST/10:00EDT and make a recommendation to OPEC+, with a meeting slated for 16:00BST/11:00EDT. As always with OPEC, timings are indicative and subject to delays. Elsewhere, eyes remain on the damage situation along the Gulf of Mexico following Hurricane Ida’s passing, with focus on whether production can swiftly come back online, with some 1.7mln BPD shuttered according to the latest BSEE release. WTI Sept resides around USD 68.50/bbl (vs USD 68.29-69.34/bbl range) while Brent Nov trades just under 72.00/bbl (vs USD 71.40-72.36/bbl range). Turning to metals, spot gold and silver have largely been moving in tandem with the Buck, with the former still above its 100 and 200 DMAs at USD 1,812/oz and USD 1,809/oz respectively. Turning to industrial metals, LME copper briefly topped USD 9,500/t on its return from the long weekend, although the downbeat Chinese PMI data has capped upside. Elsewhere, aluminium prices hit 10yr highs whilst Japan’s aluminium stocks are three major ports declined 11% M/M in July.
Colonial Pipeline said it expects to return lines 1 and 2 to service Monday evening, In relevant news, there were comments from BP (BP/ LN) that it will not restart offshore operations until pipeline companies confirm systems are working properly. (Newswires)
The OPEC+ meeting is to take place at 16:00BST/11:00EDT on Wednesday; JMMC will start at 15:00BST/10:00EDT. Separately, OPEC+ forecasts oil stocks falling in 2021 even as it raises production, according to reports; if output is fully restored, the group forecasts a new oil surplus next year. (Newswires)